Philippine Trust Company v. Honorable Court of Appeals
REITERATIONFacts
1. The Antecedents: Iluminada "Lumen" Policarpio obtained a P300,000.00 loan from Philippine Trust Company (Philtrust), secured by a mortgage over parcels of land owned by her parents. Lumen failed to pay the loan, leading Philtrust to initiate foreclosure proceedings. The Court of First Instance (CFI) rendered a foreclosure judgment in 1963, affirmed by the Supreme Court in 1969. Philtrust purchased the properties at an auction sale in 1970, and ownership was consolidated in the bank's name by 1971, with a new title issued in 1972. Lumen Policarpio filed a complaint to declare the auction sale void, which was dismissed by the CFI and later by the Supreme Court on certiorari. In 1974, an ancestral house on the property was destroyed by a typhoon. Lumen proceeded to rebuild the house without Philtrust's consent. In 1976, Philtrust filed a motion for a writ of possession, which was granted in 1977, though the Policarpios were allowed to present evidence of good faith in building the house. They failed to present evidence, and the writ of possession was issued in 1979. After several appeals and a remand to the Court of Appeals to allow Lumen to present evidence of good faith, the Court of Appeals ultimately ruled against her, upholding the writ of possession. The Supreme Court affirmed this decision. The bank sold the properties to Alto Industrial Enterprises, Inc. in 1980. An alias writ of execution and possession was issued and served in 1989, and Philtrust was finally placed in possession in 1990. 2. Procedural History: Simeon Policarpio, Modesta Reyes, and Iluminada "Lumen" Policarpio filed a petition for prohibition with preliminary mandatory injunction with the Court of Appeals, alleging grave abuse of discretion by the trial court in ordering the premature implementation of a writ of possession. The Court of Appeals dismissed, finding that the Policarpios had been fully heard. Motions for intervention by third-party claimants were also dismissed. This decision was affirmed by the Supreme Court. Subsequently, Simeon Policarpio Shipyard and Shipbuilding Corporation (SPSSC) filed a complaint for Damages, Injunction, and Mandamus against Philtrust and RTC sheriffs, alleging improper implementation of an alias writ of possession on November 14, 1990, involving properties covered by TCT 234088 and OCT-R-165. Philtrust filed a motion to dismiss based on res judicata and failure to state a cause of action. The trial court denied the motion, distinguishing OCT-R-165 from the foreclosed properties. The Court of Appeals affirmed the trial court's ruling, finding res judicata applicable to TCT 234088 but not to OCT-R-165. The present petition arose from this decision. 3. The Petition: Philtrust filed a petition for review, reiterating its claim that res judicata is applicable to OCT-R-165 and that SPSSC's complaint states no cause of action.
Issue(s)
Whether the doctrine of res judicata is applicable to the parcel of land covered by OCT-R-165. Whether SPSSC, having failed to redeem the property covered by OCT-R-165, is the real party in interest to file a complaint for damages. Whether SPSSC, as a lawful possessor, has a cause of action for damages due to the alleged improper implementation of the writ of possession.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals. It held that res judicata is not applicable to the parcel of land covered by OCT-R-165 because there is no identity of the subject matter, as this property was not included in the original mortgage and its title was issued after the initial Supreme Court judgment. The Court also ruled that SPSSC, as the lawful possessor of the property covered by OCT-R-165 at the time of the writ's implementation, has a cause of action for damages, as a possessor has the right to be respected in their possession and to be restored thereto if disturbed, pursuant to Article 539 of the Civil Code.
Ratio Decidendi
On the applicability of res judicata to OCT-R-165: The Court reiterated the elements of res judicata: (a) the former judgment is final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) it was a judgment on the merits; and (d) there must be, between the first and second actions, identity of parties, subject matter and causes of action. While the first four elements were present concerning the properties originally mortgaged (TCT 24182, included in TCT 234088), the Court found no identity of subject matter with respect to OCT-R-165. This is because OCT-R-165 was issued in the name of SPSSC in 1981, long after the Supreme Court's 1969 judgment concerning the foreclosed properties. Therefore, OCT-R-165 could not have been the subject of the prior litigation between Philtrust and the Policarpios. The Court emphasized that the litigation has spanned almost 40 years, and the specific parcels of land subject to the original mortgage were clearly identified in the 1969 Supreme Court decision. The inclusion of OCT-R-165 in the complaint for damages, which was not part of the original mortgage, breaks the chain of identity required for res judicata. On SPSSC as the real party in interest: The Court clarified that the "real party in interest" is the one who, by substantive law, possesses the right sought to be enforced, not necessarily the one who will ultimately benefit. SPSSC did not dispute that OCT-R-165 was mortgaged to Landbank and foreclosed in 1987. Although SPSSC failed to redeem the property within the one-year redemption period, the bank had deferred consolidation of title and given SPSSC the option to re-acquire the property under negotiation. Crucially, SPSSC was in possession of the property when the writ of possession was implemented. The Court cited Article 539 of the Civil Code, which states that "Every possessor has a right to be respected in his possession; and should he be disturbed therein, he shall be restored to said possession by the means established by the laws and rules of court." Therefore, even if SPSSC was no longer the absolute owner due to foreclosure, its lawful possession at the time of the alleged improper implementation of the writ gave it the right to institute an action for damages. The Court found the contention that SPSSC was not a real party in interest to be without merit. On SPSSC's cause of action as a lawful possessor: The Court affirmed that a lawful possessor has the right to institute an action when disturbed in their enjoyment of the property. Article 539 of the Civil Code explicitly protects "every possessor" from disturbance. The Court explained that this protection extends beyond mere ownership to include various forms of possession. Since SPSSC was in lawful possession of the property covered by OCT-R-165 at the time the writ of possession was allegedly improperly implemented, it had the legal standing to file a complaint for damages. The alleged improper implementation constituted a disturbance of its possession, entitling it to seek redress through the courts. The Court concluded that SPSSC's complaint stated a valid cause of action based on its right as a possessor.
Main Doctrine
The doctrine of res judicata applies when there is identity of parties, subject matter, and cause of action between the first and second actions. However, res judicata is not applicable to a property not included in the original mortgage and litigation, especially when its title was issued after the initial Supreme Court judgment.